I was introduced to the Philippines about two years back when I started working in the global services sector. And frankly, I was a bit startled by how little I knew about this giant of the contact center services market – I always thought India was the world’s largest contact center market. But its colonial heritage, accent neutrality, cultural affinity with the west, and BPS-conducive environment puts the Philippines at an altogether different level.
I began following the Philippines IT-BPS markets more regularly as I worked on this location for several client engagements. I observed how this country is a perfect example of the “playing on your strengths” approach. It is incredible how the government, iBPAP, and other partner associations have worked together to achieve the growth potential we highlighted in the Roadmap we developed in association with then BPAP and Outsource2Philippines back in 2009. Indeed, the market has doubled in size in less than six years. Today, the Philippines employs over a million FTEs, and is the second largest offshore services delivery location, next only to India.
While voice-based services have always been Philippines’ strength, it has experienced remarkable success in other areas, such as IT services, which grew at ~25 percent CAGR since 2010, and now accounts for ~10 percent share of country’s entire offshore market. While service providers have been key drivers of the growth in IT, Global In-house Centers (GICs) have pushed for growth in FAO and banking services. Several global banking companies, such as American Express, ANZ, Citibank, Deutsche Bank, HSBC, ING Group, JP Morgan Chase, and Wells Fargo, have established sizable centers in the country. Even though Bank of America has exited the country (it shut down its shop in 2014 as part of a global GIC restructuring), and JP Morgan Chase is scaling down owing to global cost cutting, overall outlook remains positive. The country has also made good use of its strong nursing talent—the largest pool of U.S.-licensed nurses outside of the U.S.—and is now the largest healthcare services provider to the U.S. The healthcare BPS sector has grown at over 40 percent YoY since 2012.
Another success area for the Philippines has been its ability to attract global companies. Over 100 have set up their GICs in the country, and close to one-fourth of them are on the Fortune 500. These GICs are expanding their Philippines strategy beyond cost arbitrage, and establishing regional hubs/HQs/CoEs. The U.S. remains the leading buyer market, with ~70 percent total demand. However, demand from Asian markets has been increasing steadily, with several Japanese and Australian companies establishing their captive centers in the metro Manila region.
With increasing emphasis on adoption of digital globally, government agencies (such as iBPAP and PSIA) are making proactive efforts to ensure that the Philippines stays ahead of the curve. It is already investing in building capabilities – from teaching the right curriculum at the universities to supporting companies’ development of required infrastructure to setting up training labs at colleges and universities – to deliver mobility, analytics and cloud-based services. We have seen some evidence of companies already delivering mobility (focused application development services for mobile) from the Philippines in the last year or so. Digital has been the buzzword in the majority of our interactions with our clients looking into the Philippines lately.
Having done well so far, I am intrigued to see how the Philippines will sustain its growth in the evolving IT-BPS ecosystem. It needs to adapt to rapidly changing consumer needs, e.g., the adoption of digital, development of multi-channel delivery systems, and a multi-skilled labor force. It also needs to ensure continuous growth in other service lines, such as banking BPS, FAO, HRO services, animation and gaming, and creative services, by leveraging its interpersonal, voice-based, and strong domain-specific skills to build scale.
It will be interesting to watch what lies ahead in the years to come. Can the Philippines continue shaping its own destiny in the global services market?